ArisInfra Solutions has made a significant step towards the Indian capital markets by submitting its draft red herring prospectus (DRHP) to the Securities and Exchange Board of India (SEBI). The company aims to raise ₹600 crore through an initial public offering (IPO), marking a new chapter in its growth trajectory. This IPO will feature a fresh issue of shares, with no offer-for-sale (OFS) component, signaling the company’s intention to utilize the funds directly for its development rather than for shareholder exits.
IPO Structure: No Offer-for-Sale Component
One of the standout features of the ArisInfra Solutions IPO is its structure. Unlike many public offerings that involve both a fresh issue of shares and an offer-for-sale, ArisInfra’s IPO is purely a fresh issue. This means the proceeds will go directly to the company rather than to selling shareholders, providing a significant boost to its balance sheet.
The company has also announced plans to raise an additional ₹120 crore through a pre-IPO placement. If completed, this amount will be deducted from the overall public issue size, reducing the total offering. The pre-IPO placement gives the company an opportunity to raise capital before going public, and it could attract institutional investors ahead of the main IPO.
ArisInfra’s Impressive Growth in Customer and Vendor Base
In terms of its operational achievements, ArisInfra Solutions has demonstrated solid growth over the last few years. Between March 2022 and March 2024, the company’s customer base grew from 431 to an impressive 2,133, showcasing its expanding footprint in the construction industry. Similarly, the number of vendors associated with the company rose from 441 to 1,458 during the same period.
This growth reflects ArisInfra’s ability to scale its operations, build strong partnerships, and secure a diverse client base. The company’s business focuses on the delivery of critical construction materials such as aggregates, ready-mix concrete, and steel, which are essential in infrastructure projects.
Over the span from April 2021 to March 2024, ArisInfra successfully delivered 10.35 million metric tonnes of construction materials. This volume highlights the company’s operational capability and its role in fulfilling large-scale infrastructure requirements.
Utilization of IPO Proceeds
ArisInfra Solutions has outlined a clear plan for the utilization of the IPO proceeds. The company is targeting several areas, with a focus on debt repayment, working capital, and strategic investments.
- Debt Repayment: The company has earmarked ₹204.6 crore from the IPO proceeds to reduce its debt, which stood at ₹268.5 crore as of May 2024. This move will strengthen ArisInfra’s balance sheet, lower its financial leverage, and improve its liquidity position.
- Working Capital Requirements: ₹177 crore will be allocated towards meeting the company’s working capital needs. This capital injection will allow ArisInfra to continue its expansion and handle larger projects more efficiently.
- Subsidiary Support: Another ₹48 crore will be directed towards the working capital requirements of its subsidiary, Buildmex-Infra, further bolstering its operations.
- Acquisition of Shares: The company plans to use ₹20.4 crore to purchase shares in ArisUnitern Re Solutions, a strategic move aimed at consolidating its business interests and ensuring stronger operational synergies within the group.
Financial Performance: A Closer Look
While ArisInfra Solutions has been expanding its operations, its financial performance presents a mixed picture. For the fiscal year 2024, the company reported a net loss of ₹17.3 crore, compared to a loss of ₹15.4 crore in the previous year. This increase in losses is a cause for concern, but it also highlights the company’s ongoing investments in growth and expansion.
On the revenue front, ArisInfra’s revenues dropped to ₹696.8 crore in FY24, down from ₹746 crore in FY23. Despite the decline in revenue, the company’s strategic focus on scaling up its customer and vendor base, coupled with its plan to reduce debt, indicates a long-term vision for profitability.
Management and Key Players in the IPO
ArisInfra Solutions has appointed JM Financial, IIFL Securities, and Nuvama Wealth Management as the merchant bankers for the IPO. These seasoned financial institutions will guide the company through the listing process, ensuring regulatory compliance and efficient execution of the public offering.
In addition, ArisInfra Solutions has retained several law firms and auditors to ensure that the IPO process runs smoothly and adheres to all legal and financial regulations.
What’s Next for ArisInfra?
With its IPO on the horizon, ArisInfra Solutions is positioning itself for further expansion in the construction and infrastructure sectors. The company’s ability to deliver high volumes of construction materials and grow its customer base bodes well for future growth. By raising fresh capital through its public offering, ArisInfra will be able to reduce its debt burden, support its working capital needs, and invest in strategic areas of the business.
However, prospective investors should consider the company’s recent financial performance and the overall risks associated with the construction sector. While the company’s operational metrics are strong, its profitability remains a concern.
Conclusion: Should You Invest in the ArisInfra IPO?
The ArisInfra Solutions IPO offers investors an opportunity to invest in a growing player in the infrastructure sector. With plans to use the proceeds for debt reduction, working capital, and strategic investments, the company is looking to strengthen its financial position and expand its operations.
However, potential investors should carefully evaluate the company’s financial performance, especially the increase in losses and the decline in revenue. Those with a long-term investment horizon and a strong appetite for risk may find this IPO attractive, particularly given the company’s growth potential in the infrastructure space.
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